Polyplastics, Inc. v. Transconex, Inc.

• Decision Date: 03 August 1983
• Docket Number: No. 82-1906,82-1906
• Citation: 713 F.2d 875
• Parties: POLYPLASTICS, INC., Plaintiff, Appellant, v. TRANSCONEX, INC., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 875

713 F.2d 875

POLYPLASTICS, INC., Plaintiff, Appellant, v. TRANSCONEX, INC., Defendant, Appellee.

No. 82-1906.

United States Court of Appeals First Circuit.

Argued June 7, 1983.

Decided Aug. 3, 1983.

Edelmiro Salas Garcia, Hato Rey, P.R., for plaintiff, appellant.

Gino Negretti Lavergne, Hato Rey, P.R., with whom Doval, Munoz, Acevedo, Otero & Trias, Hato Rey, P.R., was on brief, for defendant, appellee.

Before COFFIN and BREYER, Circuit Judges, and SKINNER, ^* District Judge.

COFFIN, Circuit Judge.

The dispositive jurisdictional question raised by this appeal is whether, when a case is removed to federal court and the court both denies remand and issues a "protective" order to the state (here, the Commonwealth of Puerto Rico) court to refrain from further proceedings, we have jurisdiction over an interlocutory appeal. Despite considerable case law holding there is jurisdiction, logic and strong policy reasons persuade us that no interlocutory review should be recognized.

I. Background

Polyplastics is a Puerto Rico corporation with offices in Humacao, Puerto Rico. Transconex is a Florida corporation with main offices in Miami, Florida. The crux of this litigation is Polyplastics' claim that Transconex failed to deliver a trailer. Polyplastics sues for the cost of the trailer, expenses, and damages. The present appeal comes in the second of two suits brought by Polyplastics against Transconex. Both were begun in Puerto Rico Superior Court, Humacao Part.

Polyplastics' first suit, against Transconex alone, was removed to federal district court on March 29, 1982 on Transconex's petition. ¹ On May 24, 1982, the suit was dismissed without prejudice for inactivity.

Polyplastics filed a new action in Puerto Rico court some three-and-a-half weeks later, this time naming two additional defendants: Maria E. Rios, a Transconex employee, and the "John Doe Insurance Co.", on the theory that the insurance company was "equally responsible for the damages done" and that Rios had made "false representations ... regarding that said insurance company will pay the damages done". Both Rios and the insurance company are alleged to be co-citizens of Puerto Rico with plaintiff.

On July 15, 1982, Transconex petitioned for removal of the new suit, claiming that diversity of citizenship remained because the insurance company was only a "nominal" defendant, and because Rios had been fraudulently joined as a device to defeat removal on diversity grounds. Notwithstanding this petition, Polyplastics then sought a default judgment against Rios in Puerto Rico court, and judgment was entered by the clerk of the Humacao superior court on August 3. On August 11, Transconex moved the district court for an order in protection of jurisdiction against further local proceedings. On August 30, Polyplastics countered with a motion to dismiss or remand for lack of federal jurisdiction. A hearing on both motions was held September 17, at which time Polyplastics was temporarily stayed from taking any further action in Puerto Rico court pending the district court's decision. On November 9, the district court issued the decision appealed here, ordering the case removed, denying the motion to dismiss or remand, and directing the Puerto Rico Superior Court, Humacao Part, "to refrain from any further proceedings in this case".

II. Appeal on Final Decision Theory

Polyplastics claims that the district court's order was a final decision appealable as of right under 28 U.S.C. § 1291. In support of this proposition, Polyplastics cites Stoll v. Hawkeye Casualty Co., 185 F.2d 96 (8th Cir.1950). While its precise theory of finality is somewhat unclear, Polyplastics argues that because Maria Rios did not join in the removal petition, the claim against her remained in Puerto Rico court. From this premise, Polyplastics concludes that the district court's anti-suit order "destroyed" its claim against Rios in Puerto Rico court. We disagree.

First, Stoll is a weak reed on the issue of finality. Although the Stoll court allowed review of removability on interlocutory appeal of an anti-suit order, the issue of appealability does not appear to have been raised, and the court's opinion does not specify under what section of the judicial code review was granted. Thus, even if Stoll is good authority for appealability on other grounds (and we do not believe it is), it offers little support for appealability as a final decision under 28 U.S.C. § 1291.

Second, although a finding of fraudulent joinder bears an implicit finding that the plaintiff has failed to state a cause of action against the fraudulently joined defendant, see 1A J. Moore, Moore's Federal Practice p 0.161 at nn. 5, 6, even a dismissal of the claim against Rios would not be immediately appealable as a final decision without entry of a separate judgment under Fed.R.Civ.P. 54(b).

Finally, Polyplastics' premise--that the claim against Rios remained in Humacao court--is simply incorrect. A party fraudulently joined to defeat removal need not join in a removal petition, and is disregarded in determining diversity of citizenship. See 1A J. Moore, Moore's Federal Practice pp 0.161[1.-1] at nn. 23 & 25, 0.161, 0.168[3.-2-2]. Removal, moreover, extends to the "case" or "action"--i.e., to the whole case and all parties and claims. See 28 U.S.C. §§ 1441 (removal of "civil action"), 1446(a) ("civil action"), 1446(e) (state court to proceed no further when "civil action" is removed unless and until "case" is remanded). ²

The real issue, however, is not whether the district court's anti-suit order was appealable as a final decision under section 1291, but whether it is appealable in the absence of a final decision as an interlocutory injunction under 28 U.S.C. § 1292(a)(1). ³ Since a considerable body of precedent exists on this question, we look first to the cases.

III. Interlocutory Appealability of Anti-Suit Order

Older cases (including one of our own) engage in some Solomonic baby-splitting, holding that anti-suit orders in removed cases are reviewable on an interlocutory basis, but only on issues other than the propriety of removal. In other words, whether, for example, the court properly balanced the equities could be reviewed, but whether the case was properly removed could not be reviewed, even though improper removal would ultimately require dissolution of the anti-suit order on appeal from final judgment. See Mestre v. Russel & Co., 279 F. 44 (1st Cir.1922) (per Bingham, J.); accord, Dillinger v. Chicago, Burlington & Quincy R. Co., 19 F.2d 196 (8th Cir.1927), overruled, 162 F.2d 87 (8th Cir.1947); McCabe v. Guaranty Trust Co. of New York, 243 F. 845 (1917), overruled, 85 F.2d 516 (2d Cir.1936). The theory of these cases is that the request for an anti-suit order is "ancillary" to the main action, and that jurisdiction in the main action cannot be reviewed in an ancillary proceeding:

"When the removal papers were filed in the District Court of the United States, that court was vested with authority to determine whether the cause was properly removed ..., and its subsequent decree, in passing upon the motion to remand, determined that the cause was properly removed. It is true that was not a final decree, and may or may not be reversed upon an appeal after final decree is entered in the court below in the original cause; but its validity cannot be inquired into here in this ancillary proceeding." Mestre v. Russel, 279 F. at 46.

Other authorities, some recent (including ourselves), reject this reasoning and hold that removal is reviewable on interlocutory appeal of an anti-suit order. Federal Deposit Insurance Corp. v. Santiago Plaza, 598 F.2d 634, 636 & n. 1 (1st Cir.1979) (per curiam); Cray, McFawn & Co. v. Hegarty, Conroy & Co., 85 F.2d 516, 517 (2d Cir.1936) (per Augustus Hand, J., joined by Learned Hand and Manton, JJ.), overruling McCabe v. Guaranty Trust Co., supra; Young v. Southern Pacific Co., 15 F.2d 280, 281 (2d Cir.1926); Peters v. Standard Oil Co. of Texas, 174 F.2d 162, 164 (5th Cir.1949); Johnson v. Butler Bros., 162 F.2d 87, 88 (8th Cir.1947); Morgan v. Kroger Grocery & Baking Co., 96 F.2d 470, 472 (8th Cir.1938), overruling Dillinger v. Chicago, Burlington & Quincy R. Co., supra; Albi v. Street & Smith Publications, Inc., 140 F.2d 310, 311 & n. 1 (9th Cir.1944); Willoughby v. Sinclair Oil & Gas Co., 188 F.2d 902, 904 (10th Cir.1951); 9 J. Moore, Moore's Federal Practice p 110.20 at n. 21. See also Codex Corp. v. Milgo Electronics Corp., 553 F.2d 735, 737 (1st Cir.1977) (appeal from the denial of an anti-suit order in one of two related suits in different federal district courts) ("[T]he denial of an injunction against suit in another forum is appealable as of right, 28 U.S.C. § 1292(a)....").

Numerous as they are, however, we find serious flaws in these cases' premises and reasoning. Of our own cases, neither Santiago Plaza nor Codex mentions, much less distinguishes or overrules Mestre, and both are at least arguably distinguishable from the present case. In Codex, the issue was not removal from state court, but a motion to dismiss, stay or transfer related litigation pending in another federal court--a situation to which different legal principles apply. See infra note 5. In Santiago Plaza, appeal was taken from an order against state proceedings entered after the district court had already granted remand to Puerto Rico court and after the Puerto Rico court had resumed jurisdiction in the case--acts which left the district court without jurisdiction to reconsider. See In re La Providencia Development Corp., 406 F.2d 251, 252-53 (1st Cir.1969); 1A J. Moore, Moore's Federal Practice p 0.169[2.-1] at n. 45 and authorities cited therein. Although we found the order appealable under 28 U.S.C. § 1292(a)(1), our opinion emphasized the peculiarities of the case and specifically identified an alternative basis of jurisdiction--mandamus. Santiago Plaza, supra, 598 F.2d at 636,...